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July 27, 2018

3 Public Sector Banks (SBI, PNB & BOB) to introduce Performance-Linked Salary

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Three Public Sector Banks (PSBs) State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) are planning to introduce Performance-Linked Salary Structure for the Senior Management.

According to a report by Business Standard, this is the first time that any Public Sector Bank will introduce such an incentive structure for its senior management, although an approval from the government shall be required for it.

"The bank is seriously thinking of introducing a system of performance-based incentives for officers above the general manager grade. There will be a component of fixed and variable pay. But it will evolve slowly," PNB Managing Director and Chief Executive Officer, Sunil Mehta announced.

State Bank of India (SBI) and Bank of Baroda (Bob) may also follow a similar model and are working on a compensation framework, sources said. However, the banks would need approval from the government for such a move.

While this is a first-of-its-kind move among PSBs, many private banks have already introduced a variable component in their salary structure.  For PSBs, the pay and allowances of different levels of employees are normally decided through bipartite settlements between the Indian Banks’ Association (IBA), the bank’s management and trade union body United Forum of Bank Unions (UFBU).

The proposed revised salary structure for senior employees comes in the aftermath of opposition from bank unions against six PSBs -- PNB, SBI, BoB, United Bank of India, Indian Bank and Oriental Bank of Commerce -- for restricting the latest wage negotiations up to scale-III officers or up to the senior manager level. The bank unions are reportedly not in favour of the performance-linked salary structure. 

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